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January 21, 2004

Key West Jewelry Dealer Arrested in Tax Theft

Key West - The owner of a Key West jewelry store has been arrested on charges of failure to comply with Florida tax law, following a joint investigation by the Monroe County State Attorney's office and the Florida Department of Revenue (DOR).

The investigation probed allegations that Loukos Kongos, owner of the store, had engaged in tax fraud designed to avoid charging sales tax on taxable transactions, including allegations that he understated taxable sales in tax returns filed with the state.

Kongos, 47, of Key West, was arrested Wednesday on several felony and misdemeanor charges related to violations of tax law. If convicted, Kongos faces up to five years in prison and up to $5,000 in fines, plus repayment of tax, interest, penalty, and investigative costs. Kongos operates Capricorn Jewelry in Key West. Bond was set at $500,000.

In court documents filed in the case, Revenue Department investigators said that case arose after a civil lawsuit filed by one of Kongos's customers turned up evidence of tax fraud. In issuing a judgment in the civil case, Judge Wayne Miller found that Kongos had engaged in fraudulent practices to avoid collecting sales tax on a sale. Under state law, tax is due on sales made in the state, but sales tax is not due if an otherwise taxable item is shipped out of state to a buyer. According to the judge's ruling, Kongos had illegally agreed to sell expensive jewelry tax free to visiting clients, allow the clients to take possession of the jewelry in Key West, and later ship clients inexpensive trinkets at their out-of-state addresses. Kongos would then claim that the trinket that was shipped was the expensive piece of jewelry, and thus no tax was due.

During a subsequent joint investigation, State Attorney's Office investigators and DOR investigators searched Kongos's business and seized invoices, financial records, mailing and shipping records, and computers. DOR investigators researched the records and determined that Kongos had underrepresented taxable sales at his business between January 2000 and April 2003 by more than $400,000.

Revenue investigators also found 30 out-of-state customers who admitted taking their purchases with them at the time of purchase, thus making the transactions taxable. However, no tax had been collected or remitted on these sales. Revenue investigators charged that, in all, Kongos had stolen or failed to collect $36,183.33 in sales taxes and had repeatedly filed false and fraudulent tax returns.

"To be fair, tax law must apply uniformly to all businesses," said Jim Zingale, executive director of the Revenue Department. "Tax cheats steal money that the public pays to support vital public services, such as law enforcement and education. They also steal a competitive advantage over honest businesspeople who pay their taxes. The Department of Revenue cannot and will not allow this to occur."

If you have information about tax theft, please call the Florida Department of Revenue investigations office in Key West at 305-513-3295.